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Pssst, Buddy... Wanna Buy An Airplane Manufacturer?

Could Raytheon be
looking to sell its aviation assets? The Wichita Eagle
quotes Wall Street aviation analysts who say it's just a
matter of time before Raytheon puts its Wichita aircraft division
on the market once again.

"I think it's a matter of time and price and having it into
shape," said SG Cowen aerospace analyst Cai von Rumohr.

The issue came up recently when Raytheon CEO William Swanson was
asked whether divestiture of Raytheon Aircraft made sense.

"The one thing I know is that you don't make decisions like that
when you have to put your business in the right shape," Swanson
said. Cryptic, yes, but is that a message to the industry?

It's "no secret" that the aircraft business is "not core,"
Swanson said during Morgan Stanley's "CEOs Unplugged Industrials
Conference" earlier this month.

The aircraft division's classification "as a non-core business
is a pretty clear way of saying when the opportunity is there and
when the conditions are right, we'll sell it," said JSA Research
aerospace analyst Paul Nisbet.

Raytheon is "fully committed to the aircraft business," said
Jackie Berger, Raytheon Aircraft spokeswoman. "Our stated
commitment is to return it to pre-eminence in the industry."

After losing $1 billion over the past three years and eating up
almost $1.5 billion in cash, Raytheon Aircraft executives want to
return the company to profitability.

Swanson said there must be consolidation -- a "rationalization"
in his words -- in the general aviation industry.

But before that can happen, the "right structure" must be in
place within the companies -- they must have the right production
rates, cost structure and supply chain strategy, he said. In other
words, GA manufacturing industry-wide is broken and it's going to
take some major changes to fix it. Now, Swanson says, the issue
becomes one of timing.

"You don't want to do
that while something's swimming funny," he said. "I always say the
sharks come out at that point. So you get the business right....
It's no secret that RAC (Raytheon Aircraft Co.) is not core."

Raytheon is committed to "getting it right and supporting
(Raytheon Aircraft CEO) Jim (Schuster) and his team as they do what
they say they're going to do, and I'm pleased that we've got that
team doing it," Swanson told investors.

Schuster has been working to fix the bottom line. He announced
earlier this year that Raytheon Aircraft is cutting back on what it
manufactures within the plant. By 2006, he told employees, the
plant will be doing final assembly, but will not handle small parts
and assemblies in Wichita.

One major project on Raytheon Aircraft's list of things to do --
perhaps the top priority -- is getting the Hawker Horizon business
jet certified and ready for delivery.

Swanson was asked at the analyst meeting whether it would be
easier to sell the aircraft company after the Hawker Horizon is
certified.

"Yeah," he said. "Exactly." Hmmm. That throws a bit more fuel on
the divestiture fire.

Three years ago, Raytheon was on the hunt for a buyer for
Raytheon Aircraft. But Raytheon took its aircraft business
off the market when it couldn't find a taker, according to
analysts. Some of them said that the $4 billion asking price was
simply too high.

If the company put Raytheon Aircraft up for sale now, it
wouldn't get its asking price said von Rumohr, the SG Cowen
analyst.

It must get costs down and "get into the black so you can
command the price you'd like to get," he said. "That's kind of
where I think they are."